Following the release of some poor inflation numbers from the Australian Bureau of Statistics earlier this week, the chances of another interest rate cut have skyrocketed.
Currently, official interest rates are stuck at a record-low 2%. However, a growing chorus of economists and the futures market are tipping the RBA will lower the official interest rate to just 1.75% by year's end.
So just when you thought current returns were bad, retirees and risk-averse investors can expect even lower returns from term deposits and savings accounts if the RBA cuts again.
Conversely, sharemarket investors will relish the news because it makes shares more appealing. And it's easy to see why shares could be a better option…
Here are five S&P/ASX 200 (Index: ^AXJO) (ASX XJO) stocks offering BIG trailing dividend yields:
- National Australia Bank Ltd. (ASX: NAB) – trailing gross dividend yield: 9.2%
- BHP Billiton Limited (ASX: BHP) – trailing gross dividend yield: 9.6%
- Retail Food Group Limited (ASX: RFG) – trailing gross dividend yield: 7.1%
- Flight Centre Travel Group Ltd (ASX: FLT) – trailing gross dividend yield: 5.8%
- Wesfarmers Ltd (ASX: Wes) – trailing gross dividend yield: 7.1%
Buy, Hold or Sell?
As can be seen above, the dividend on offer from shares in some of Australia's largest companies is far superior to the current and expected future returns from cash and fixed interest.
However, caution must be exercised because shares are a riskier asset class than fixed interest.
Indeed, at today's prices, I'm not a buyer of NAB, Wesfarmers and BHP shares. However, I am considering topping up on Flight Centre and Retail Food Group shares in my personal portfolio for investment over the long term, because they look cheap and their dividends appear largely sustainable.
